Colombo: President Sri Lanka Gotabaya Rajapaksa asked China to help restructure debt payments as part of an effort to help South Asian countries faced a deteriorating financial crisis, his office said in a statement on Sunday.
Rajapaksa submitted a request during a meeting with Chinese Foreign Minister Wang Yi in Colombo on Sunday.
Sri Lankan has benefited from billions of dollars in soft loans from China but the island state is currently in the midst of a foreign exchange crisis that places it on the default threshold, according to analysts.
“The President shows that it will become a great relief for the country if attention can be paid to restructure debt payments as a solution to the economic crisis that has emerged in facing Covid-19 pandemics,” said the Rajapaksa office in a statement.
China is the fourth largest lender Sri Lanka, behind the international financial market, the Asian Development Bank (ADB) and Japan.
Over the past decade China has lent Sri Lanka more than $ 5 billion to highways, ports, airports and coal power plants.
But critics charge funds used for white elephant projects with low returns, which have been denied China.
Rajapaksa also asked China to provide “holder terms” for his export to Sri Lanka, which numbered around $ 3.5 billion in 2020, the statement said, but did not provide further details.
Rajapaksa also proposed that Chinese tourists return to Sri Lanka provided they obey strict Covid limitations, including only staying in previous approved hotels and only visited certain tourist attractions.
Before China’s pandemic was the main source of Sri Lankan tourists and the island imported more goods from China than from other countries.
Sri Lanka is an important part of the Chinese suburban tie and road initiative (BRI), a long-term plan for funding and building infrastructure that connects China to all over the world, but others include the United States for “debt traps” for small countries.
Sri Lanka has to pay a debt of around $ 4.5 billion this year starting with A $ 500 million International Sovereign Bond (ISB) which is due on January 18.
Swap $ 1.5 billion yuan from China helps this island increase its reserves to $ 3.1 billion at the end of December.
Payment of debt to China in 2022 is likely to be smaller than the ISB commitment of $ 1.54 billion, around $ 400 million – $ 500 million, the Sri Lanka Ministry of Finance sources told Reuters.
Sri Lankan Central Bank has repeatedly convinced all debt payments will be fulfilled and said funds for January ISB have been allocated.